Blewett v. Front St. Cable Ry. Co.; Front St. Cable Ry. Co. v. Blewett, 51 F. 625

Gilbert, Circuit Judge. This is a writ of error to the circuit court for the state of Washington. Edward Blewett, the plaintiff, brought an action against the defendant to recover upon breach of a bond.

The complaint alleges that on November 23,1889, the defendant executed to plaintiff a bond in the penal sum of $18,000, upon the condition following: “The condition of the foregoing obligation is such that whereas, the said Edward Blewett has granted and conveyed to Jacob Forth, assignee of the Front Street Cable Railway Company, the following described property, [describing certain lots,] heretofore deeded to Jacob Furth as a part of a bonus given to secure the building of the cable road hereinafter mentioned: Now, therefore, if the North Seattle Cable Railway Company, a corporation organized and existing under, the laws of the state of Washington, its successors and assigns, shall, within ten (10) months from the date of these presents, construct, ready for operation, a double-track cable railway of the same gauge as the railway of the Front Street Cable Railway Company, and operate ears both ways thereon, from the present terminus, [describing the line of road to be built,] then this obligation shall be void, otherwise to be and remain in full force and effect. ” The complaint further alleges that on the same date two deeds were delivered from the plaintiff to Jacob Furth, the assignee of defendant, conveying the lots mentioned in the bond for an aggregate considération recited therein of $18,000, and that there has been a total breach of the condition of the bond by the defendant, to the plaintiff’s damage in the sum of $18,000, with interest from September 24, 1890, and costs.

The answer, after denying certain portions of the complaint, but admitting the execution and delivery of the bond and the deeds, proceeds to set up an affirmative defense in substance as follows: That on or about November 1, 1889, the plaintiff, to induce defendant to construct the cable railway mentioned in the bond and for the benefit of plaintiff’s property, proposed that' if defendant would construct .said railway he would, as a bonus for the construction of the same and an inducement, for the operation thereof, donate to defendant the lots mentioned in the bond; but that it was understood and agreed that, if a sufficient subsidy could not be obtained to warrant the construction of the road, the same would not be constructed, plaintiff'would donate the lots mentioned,, and that in pursuance of such agreement the plaintiff executed the deeds and delivered the same to Jacob Furth, under the understanding that Furth was to hold said deeds in escrow, and should not deliver the same to defendant until defendant had constructed and put in operation the railway, and, in case of failure therein, then the said Furth was to reconvey the lots to plaintiff, and defendant-' should be exonerated from any claim or demand.

That in pursuance-of such agreement the defendant executed the bond, and at the time of delivering the same to plaintiff it was expressly agreed that, if defendant should be unable to secure sufficient subsidy as above set forth, then the bond should be null and void, and of no binding force upon defendant.

That the defendant was unable to procure sufficient subsidj, and accordingly, on October 1, 1890, Jacob Furth tendered a reconveyance of the lots, but plaintiff refused to accept the same; and that said Furth has always been ready to reconvey the same since said time, but the plaintiff refuses to accept the same. A demurrer to this affirmative defense was sustained.

On the trial the plaintiff was allowed to amend his complaint by adding an allegation to the effect that the true and only actual consideration of the deeds was the making and delivery of the bond, and the actual consideration of the bond was the making and delivery of the deeds, and that the delivery of all the instruments was simultaneous. The cause was tried before the court without a jury, and the findings of the court were made in favor of plaintiff, assessing his damages at $18,000.

Both parties have sued out writs of error, the plaintiff assigning as error the refusal of the court to allow interest upon the amount fixed as damages in the bond, the defendant making three principal assignments of error: First, error in sustaining the demurrer to its affirmative defense; second, error in construing the penal sum named in the bond to be liquidated damages, and adopting tlie same as the measure of defendant’s liability to plaintiff'; third, error in allowing plaintiff to amend his complaint as above mentioned.

The first question to be considered is whether there was error in sustaining the plaintiff’s demurrer to the affirmative defense. This defense as pleaded contains inconsistent averments. It assumes that Furth could occupy the position of grantee in the deeds, and at the same time hold the deeds in escrow. It also fails to show that Furth was a party to the understanding therein set forth, or agreed to be bound by its terms.

Viewed in the most favorable light that can be claimed for it, it can only be regarded as an attempt to vary the terms of the bond by proving the existence of a contemporaneous oral understanding. The bond recites that the lots have been granted and conveyed to Jacob Furth, “assignee” of defendant. The affirmative defense attempts to say that the deeds to Furth were delivered to him in escrow, to be by him delivered to the company upon a certain contingency, on the failure of •which the lots were to be reconvcyed to the plaintiff.

The bond provides that the penalty therein fixed shall be incurred upon the failure of the company to construct and operate the road within 10 months from date. The oral understanding would deny this, and in its stead would prove that the bond, although sealed and delivered, was not to take effect or operate as a bond unless sufficient subscriptions -were scoured to justify the enterprise named in the bond. Counsel for defendant contends that the true meaning of this pleading is that Furth was to hold the title to the lots in trust,, and that tlie court should so construe it.

This construction would not only be a departure from the rule of construction of pleadings, but, if adopted, would not, alter the effect of the pleading. The objection that it contradicts the terms of the written contract would in no degree be obviated.

There is no allegation here of fraud, accident, or mistake in executing the bonds or the deeds, or in delivering the same, and this case does not fall within any of the exceptions under which evidence of a contemporaneous parol agreement or understanding may be admitted to alter, contradict, or vary the terms of tlie written instruments; and there was no error in sustaining the demurrer. Neither do we find any error in the second assignment. It is stipulated that the lots wore worth $18,000. Tlie deeds recite that sum as the consideration of their conveyance.

The bond fixes -that amount as the penalty in case of breach. The breach was total. The lots were still worth $18,000. The plaintiff’ could not compel their reconveyance to him. If the offer of Jacob Furth to recouvev has any effect, it is to admit that the value of the lots was the measure of plaintiff’s damages. It is true the bond by its language does not declare that $18,000 shall be deemed liquidated damages in case of breach. This omission, although a strong circumstance, is not a controlling consideration in construing the bond.

The court may construe the penalty as liquidated damages in cases where the parties have not so nominated it. The construction will depend upon the intention of the parties, to be ascertained from the whole tenor and subject of the agreement.

Considering the circumstances under which this bond was made, the objects to be accomplished, and the purpose of the conveyances, together with the difficulty of computing the actual damage upon any other hypothesis, there is strong reason for holding that the parties to this agreement, by fixing the value of the lots as the penalty in the bond, intended thereby to liquidate the damages in case of total breach of the conditions of the bond. But it is not necessary to hold that the penal sum is liquidated damages. The evidence proved that $18,000 was the true measure of the plaintiff’s damage.

What benefit he might have derived from the completion and operation of the road does not appear, but it does clearly appear that the loss he suffered was, at least, the full value of the property he had conveyed away, and for which he had received nothing in return. The permission to amend the complaint, which is assigned as error, was a matter within the discretion of the court. The amendment could not prejudice the defendant. The new allegations thus introduced were not variant from the recitals of the bond and deeds.

The evidence which was offered to sustain them would have been properly admitted under the pleadings before the amendment was made. ■ It remains to be considered whether there was error in not allowing the plaintiff interest in addition to the amount found due him as damages. It is conceded that $18,000 is the limit of the damages that plaintiff can recover, but it is claimed that, inasmuch as that amount became due to the plaintiff immediately upon breach of the bond, he should recover interest upon it from that date, or at least from the commencement of the suit.

The weight of American authority is in favor of allowing interest beyond the penalty from and after the date of the breach, in all cases where the damages equal or exceed the penal sum. It is allowed, not as additional damages for the breach, but'as damages for wu-ongfully withholding a payment that has become due.

In this case, however, the court below, in refusing to allow interest, expressly took into consideration the fact that the lots which the plaintiff had conveyed, and for the value of which he obtained judgment, were and are wholly unproductive, yielding no income, and, the finding of the court upon the amount of damages being in the nature of the verdict of a jury, we are indisposed to disturb it. The judgment is affirmed.